Home Buying in Oxnard>Question Details

Helena, Home Buyer in Oxnard, CA

I am a first time home buyer with a zillion questions, but the biggest one i have is about the fha loans vs conventional loans. Are fha loans better?

Asked by Helena, Oxnard, CA Tue Mar 8, 2011

I am very confused about how this works, i heard different stories and would like a straight answer. My credit score is over 750 but my boyfriend who has no credit makes the income to qualify for a home, i don't quaify alone due to my income. can he be put on the home loan with me alothough he has no credit score since mine is good? can we still qualify for a conventional loan if the rates are better? or should we stick to fha? please anyone wirh real estate and loan expertise!!! I will so appreciate it

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24
Helena,
♦ Yes, your boyfriend can assist as a co-borrower, as long as he does not have negative credit.
♦ Conventional financing will be better, if you have the 20% (min.) to put towards a down payment for 4 key reasons:
1) - This eliminates PMI (private mortgage insurance), so your payment will be lower.
2) - Conventional loans have a lower interest rate, since the risk is lower to the lender.
3) - Conventional financing is easier to qualify for given your scenario.
4) - If you are writing an offer and are approved for a Conv. loan, your offer will be accepted over an FHA Buyer's offer.
♦ Keep in mind you will also need to have closing costs of apx. 3% (although you can ask the seller to pay them in your offer)
♦ Another factor will be how much $$ you have in reserve, after you close escrow.
♦ Another factor will be how long you've been at your jobs.

Let's set up a time that's convenient for you and your boyfriend to meet with a local lender familiar with the best options for you and your particular situation. You'll come away knowing where you stand and how to best approach the home buying process. We even have a complimentary copy of "Your First Home: The Proven Path to Home Ownership" ~
♦ Drawn from the real-life experiences of hundreds of thousands of first-time home buyers, "Your First Home" provides proven, practical guidance on how to:
~ Hire a great real estate agent
~ Determine what you can afford to buy
~ Secure the best financing
~ Recognize the right home for you
~ Craft a winning offer and negotiate with sellers
~ Spot serious issues at inspection
~ Close on your new home and maintain it
~ You'll also learn about successful creative financing strategies and ways to overcome less-than-perfect credit.
2 votes Thank Flag Link Wed Mar 9, 2011
Hi Helena
I understand your frustration. I am a local lender in Westlake Village, Ca and have mad a 24 year career working with First Time Home Buyers. In order to use your boyfriends income for qualifing he will need a FICO score. I can help you make this happen. Wether it be FHA or conventional financing I think it would be best to look closer at your personal situation. Feel free to contact me anytime scott.gilman@prospectmtg.com
1 vote Thank Flag Link Thu Mar 10, 2011
Helena,
To me the issue comes down to down payment. If you are working with a small down, FHA will be your best bet. The minimum is 3.5%, the rates are surprisingly competitive and the Mortgage insurance is usually less than what you would get with a low down conventional loan.
If you have 20% down, you will likely use a conventional loan. There is no mortgage insurance requirement and rates are great.
Now, once you meet with a lender and all your details are examined, they may have better information for you. Best of luck.
1 vote Thank Flag Link Tue Mar 8, 2011
My best advice is to shop around and compare the different programs,ask alot of questions and have the banks compete for your business...good luck.
0 votes Thank Flag Link Thu Mar 17, 2011
I have only one answer. You need to talk with a loan officer or mortgage broker. That person will give you exact picture of where you are and what program or loan type is better for you.
0 votes Thank Flag Link Thu Mar 17, 2011
Two quick comments:

Your boyfriend does have a credit score. In today's world, if you breathe, you have a credit score. Find out what his is. Then work on strengthening it. There's some advice below, and there's plenty more online. But he DOES have a credit score. (A loan officer can tell you what his scores are.)

Second, get an agreement in writing before any purchases on who owns what, and who's responsible for what. Kind of like a pre-nuptual agreement. If you want ownership to be 50/50, that's fine. Put it in writing. What if the two of you break up? Who gets the house? Or does it get sold. Who's responsible for the mortgage. He earns more; will he pay more? (If so, you see why it's important to specify percentage of ownership.) If your income goes up, should the amount you pay for the mortgage go up? Who pays for the utilities? GET IT IN WRITING.

Hope that helps.
0 votes Thank Flag Link Wed Mar 16, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Have you tried the HUD website? I put their address in the Web References below. This site contains a lot of information about fha loans and how they work. It also has great information for first time homebuyers. Read up on it then call a reputable mortgage company to discuss your options.

Don't rush into things. Educate yourself first and feel comfortable in your knowledge before you look at homes. Looking at homes is very emotional, which is okay. But, have the the nitty gritty of finances worked out first, when your head is still cool!
0 votes Thank Flag Link Tue Mar 15, 2011
Buying your first house will usually cause much consternation about many things -- there is a lot involved, and until you get on the roller coaster buggy and fasten the seat belt, it may look like a lot of fun, but once you're on the ride, you better hold on! Buying a house will require financing, unless you have the cash to buy in the bank. Financing these days is a troublesom process filled with very stringent requirements, mostly because the "secondary market" (What is the secondary market? A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves) is dubious about "mortgage-backed securities" and there are few "players" who will buy these loans without some assurances, but that is another story.

As for which program is best for your circumstances; you're in tough situation because good credit alone does not a good applicant make. Nowadays the lenders scrutinize the complete financial profile of the borrower(s), and they verify all the information thoroughly. Moreover, if you have credit, but not sufficient trades, this could be cause for concern. Or if you have income but not enough proof of where that is coming from or the stability of the same, that could be cause for concern.

Conventional loans require more down payment; FHA has a few features that favor first time buyers, e.g., they'll start with a lower down payment (3.5% of the purchase price), and also scrutinize the house for important health and safety considerations. This also is a crux because a seller who isn't keen on "fixing" things, might see the FHA rules as contrary to his/her goal of a "no-hassle" sale.

The best you can do presently is to sit down with a knowledgeable loan agent, mortgage banker, etc., who can review your financial profile and make recommendations to get on track with what will work given your particulars.

If FHA results being the loan you qualify for, you won't regret getting into your new house with favorable financing in place -- a fixed loan, amortized over 30 years, at the best rates on the market in a long time, and with little money from you -- 3.5% of $100,000 is only $3,500! Not bad.

Of course there is much more to this than what my colleagues and I have shared, but it is a start. If you would like more information, please feel free to ask for it. Good luck!
0 votes Thank Flag Link Tue Mar 15, 2011
FHA loans compare to conventional loans?
Seller can contribute more on a FHA Loan – Up to 6%
Borrower can obtain a gift from a relative – Borrower can obtain 6% of the sale price from Nehemiah, Ameri-Dream, these are non-profit agencies approved for gift/down-payment assistant programs with FHA Loans

Conventional loans usually require a larger down payment. And, if you have less than perfect credit you may not qualify for many conventional loans and find yourself being offered loans with higher interest rates and/or fees than you expected. The best thing to do is compare the cost of the conventional loan to an FHA loan line-by-line. What are the fees, interest rate and mortgage insurance on each? How much down payment is required? For some borrowers, a conventional loan may be less expensive. For many others, it will be more expensive than FHA.
Web Reference: http://www.LiveOjai.com
0 votes Thank Flag Link Thu Mar 10, 2011
hi....great advice below...it isn't which is better or lower rate....it's what loan program best suites your needs as a homebuyer based upon your individual situation....
contact a local licensed mortgage originator for the answers...
very best regards...
bob mcclure
NMLS# 162592
0 votes Thank Flag Link Thu Mar 10, 2011
Hello Helena,
The only option for you and your boyfriend is FHA. There is a program that allows for alternative credit items to be added to your boyfriends credit profile ie..rent and utilities. There can not be any negative credit items on your boyfriends credit and it's ok that he doesn't have a credit score.
I would like also like to point out when obtaining real estate loan info, it should be obtained from a real estate loan originator and not a Realtor. While Realtors are generally knowledgable in regards to real estate lending, they may not be up to date with all the new and upcoming laws, and ever changing program guidelines. I wish you the best in your pursuit of obtaining real estate financing and congrats on using Trulia to obtain answers on your questions, it's a wonderful tool.
0 votes Thank Flag Link Thu Mar 10, 2011
FIRST ANSWER
A conventional loan and an FHA loan can both be great tools when you are in the market for a house. FHA loans can be a great source of savings for you as well as offering several other benefits. A conventional loan also has its advantages. The decision of whether to use an FHA loan or a conventional loan can sometimes be difficult. Here are a few benefits and drawbacks of each.

Conventional Loan Benefits
The big advantage of conventional loans is that they often do not come with the amount of stipulations that FHA loans do. For example, with FHA loans, if you refinance or sell your house, you will lose all of the money that you saved by going into it in the first place. Through prepayment penalties and other costs, it may actually cost you more. The rules and regulations are far less strict with conventional loans in many cases.

Conventional Loan Drawbacks
There are many things that would qualify as a drawback of a conventional loan. For one thing, it is much more difficult to qualify for a conventional loan. The bank is basing everything on your personal credit and guarantee. With an FHA loan, the government is standing behind the loan, so you are more likely to be approved. With conventional loans, you will be forced to qualify on your own merit.

FHA Loan Benefits
FHA loans have many benefits over conventional loans. For one thing, the down payment on the house will be much lower. The down payments are low enough that almost anyone can qualify. With conventional loans, you may need a lot of money in savings in order to make the down payment to get the house.

Another advantage of FHA loans is that you can secure a lower interest rate. Since the government is backing the loan for you, they will also provide you with a lower rate. Anytime you can secure a low interest rate, it is definitely to your advantage. You can save thousands of dollars over the life of your mortgage.

The approval process is also different for this type of loan. The FHA will approve more applications than a traditional lender. If you have questionable credit, you may be approved by the FHA when you would not be approved by a regular lender.

FHA loans also has more flexible repayment terms available. You can get a loan with a number of different repayment options and payment plans. Whether you want a 30-year fixed rate mortgage or a reverse mortgage, the FHA has options for you.

FHA Loan Drawbacks
The FHA is a government program and anytime you deal with government programs, you know that there will be some problems. You will have to go by their guidelines and regulations throughout the whole process. You will be saddled with prepayment penalties and other hassles that you may not be used to with a conventional mortgage lender.

Thank you to Mortgage 101
0 votes Thank Flag Link Thu Mar 10, 2011
The biggest reason people go with the FHA are the lower credit scores are accepted, only 3 1/2% down and higher qualifying ratios can be used which allow you to mortgage more than a conventional mtg.
0 votes Thank Flag Link Thu Mar 10, 2011
I really don't see anyway you and your boyfriend would qualify for any type of mortgage. Although your credit score is outstanding, you do not have the income to support the loan. Whereas, your boyfriend has the income but no credit score. I would suggest you first request a copy of both of your credit reports if you have not already done so. They are free (one per year per bureau): http://www.annualcreditreport.com. (don't be fooled by the other "free" ones). Next I would have him apply for a couple of credit cards, never charge more than 30% of the available balance and pay off EACH month IN FULL. He can build up his score pretty quick. I would say he would be ready to qualify 9-12 months (maybe sooner). Don't pull all three credit reports at once. Pull one now, one in 4 months and another one 4 months from that one.

If you have less than 20% down, you will most likely have to buy PMI (Private Mortgage Insurance). I would also suggest saving as much down payment as possible.

If I were in your position, I would ask around and find the best Realtor in your area that specializes in "first time home buyers". They can be invaluable in this process. They will know all of the sharp lenders in the market.

Good luck!
0 votes Thank Flag Link Thu Mar 10, 2011
Hello Helena, You have taken the first step in the purchase of your home which is Deciding to purchase. The next step is contacting a Licensed, Credible, Seasoned Lender. Each situation varies with loans. The more the details that come out the more the percise answer that you will get. Its great you have posted the question but it is a very wide question. What works for one person may not work for you. Good luck
0 votes Thank Flag Link Wed Mar 9, 2011
Helena: Finding a Mortgage lender who can explain the different loan programs to you and be patient and answer all of your questions is extremely important to you right now. FHA loans are for consumers who don't have at least 10% or 20% to do a conventional loan. What you and your boyfriend really need to do is to make an appointment with a mortgage lender who does BOTH: FHA and Conventional loans so that you can see the differences through a "Good Faith Estimate", prepared for each type of loan program you qualify for. That's the only way you will learn and be educated about the different loan programs and which one is best for your situation.

Your boyfriend can improve his credit quickly through a couple of different methods. First he can open a secured line of credit at his bank or credit union. Use it and pay it off each month for a couple of months in a row. Also, lenders can use credit history from cell phone accounts and insurance if he is just lacking any credit history at all.

Planning for all of these steps before you actually begin looking at homes will make the whole home buying process much easier for you. It's great you are asking these questions now! All the best!

~~~~~~
0 votes Thank Flag Link Wed Mar 9, 2011
Helena-

Great credit score. My compliments. I think you have been given some good advice but alot of agents
work with certain loan brokers that will be able to work wonders with the income and the FICO Score.

As for FHA or Conventional. It is really a personal choice, and it does depends on the price range
that you are looking it.

Just call me if you have any questions, I specialize in Oxnard having recently closed 3 homes in
the last month in Oxnard with first time homebuyers.

Good Luck Helena.
0 votes Thank Flag Link Wed Mar 9, 2011
Seems to me that your boyfriends lack of credit may make the process a bit harder. If he can establish 1-4 crdit cards over the next few months, purchase an otem or two and pay them off his credit will be established quickly. Speaking to a professional Lender and Realtor is the best option for you now. My advice is to put your house hunting on hold for a short while until you know exactly where yor stand. Best of Luck!
0 votes Thank Flag Link Wed Mar 9, 2011
You should first see how much money you have for down payment and closing costs and see if you can expect a gift money form a relative to help. Then you need to sit down with a loan officer who will give you an idea of closing costs and monthly payments for the mortgage . You should also go to http://www.hud.gov and look up resources for buyers including information about mortgages and closing costs and names of lenders .
Web Reference: http://www.gitabantwal.com
0 votes Thank Flag Link Wed Mar 9, 2011
Helena,

There are likely as many loan programs as you have questions. Our recommendation is to not limit your search for financing to your identified choices but to explore all options. But as previously noted, the major difference is "down payment" availability.

The first step in buying a home after getting your personal budget in order is collecting information on the various types of funding programs. The best way to accomplish this is to visit several loan specialists and begin collecting information.....and asking questions.

Your best course of action will materialize....just gather your information and give it time.....

Good luck,

Bill
0 votes Thank Flag Link Wed Mar 9, 2011
It depends on your individual situation. Get in touch with a Realtor who will push you in the right direction.
0 votes Thank Flag Link Wed Mar 9, 2011
Speak with a loan officer that can compare several loan options side by side and can give you different scenarios.
0 votes Thank Flag Link Wed Mar 9, 2011
Without looking at your specific situation, any advice you get here may or may not be the right advice. I strongly recommend that you speak with a licensed California loan officer and have them go over it with you. For some, FHA might be better and for others, conventional may be better. It's more than just the amount of down payment, it sounds like you might have some guideline specific issues that only a seasoned loan officer can assist you with.

Gregorio Denny
NMLS# 247044
DRE# 01817727
Web Reference: http://TripointMortgage.net
0 votes Thank Flag Link Wed Mar 9, 2011
0 votes Thank Flag Link Tue Mar 8, 2011
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